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Rwandan Exports Sector Needs Finance

By Peterson Tumwebaze

KIGALI, Rwanda, August 23, 2014 (The New Times) -- Celestin Baranyerese is a mineral exporter. The business requires huge sums of money to run smoothly. Baranyerese, also the president of the Rwanda Co-operative for Miners in Northern Province, has failed to secure funding for the venture. He says he has applied for loans from all the commercial banks in town to no avail.

"I submitted all the requirements, including certified documents from Ministry of Trade and Industry, but banks have kept a blind eye," he says.

Baranyerese is not alone; the problem is experienced by most small exporters, across all sectors. "The only thing banks keep telling us is the sector is risky for them to commit large amounts of capital."

Lack of access to affordable credit is only part of the problem, according to business analysts. The country's export industry is still struggling with challenges, including, limited market, high taxes, poor export infrastructure and lack of skilled manpower.

Jerome Iryumugabe, another exporter, says he is on the verge of closing his business due to high taxes and low power supply. "It's difficult for us to become competitive in regional and global markets because the cost of production is still high," Iryumugabe says.

Government steps in:

It is because of challenges like these that the government reviewed the national export policy to create an enabling environment and boost export receipts and volumes. According to Francos Kanimba, the Minister for Trade and Industry, the new strategy seeks to increase export volumes address the challenges the sector faces and also to facilitate the private sector and enhance its capacity to produce quality goods.

"We want to address energy and infrastructure shortfalls so exporters can improve production. The government will also provide industrialists serviced commercial land in the special economic zones and industrial parks across the country. This will improve access to raw materials and provide technical knowhow that will help address quality along the value chain," Kanimba notes.

He adds that under the new strategy, government will build bonded warehouses, increase cold chain facilities, promote export diversification and invest heavily in skills and innovation programmes.

The new policy also provides for an export guarantee facility for short-term security for pre and post-shipment finance for middle tier exporters.

"We are also targeting to expand the list of goods covered by AGOA (African Growth and Opportunity Act) to increase access to US markets and lobby EU to allow us more access to EU markets," Kanimba says.

Government is also seeking accreditation for all food and product quality certification; and improve its data collection laws in line with EU requirements to facilitate more access to European export markets.

Current export figures:

Exports receipts for traditional exports, including tea and coffee, declined by 15 per cent during the fourth quarter 2013, from $80.8 million to $68.01 million, according to central bank statistics. The decline was attributed largely to poor coffee receipts which fell by almost 5615 per cent.

The export sector brought in $130.14 million between January and March 2014 compared to $129.61 million during the same period in 2013, registering a marginal decline of 0.415 per cent. With the new strategy in place and fully operational, pundits are optimistic that the country could grow its export volumes and earnings, thus reduce its trade deficit which expands by the day.

Other initiatives:

Rwanda Development Board (RDB) recently unveiled its Export Development Programme (EDP) aimed at fast-tracking export growth in the next one year.

According to Eusebe Muhikira, the head of trade and manufacturing department at RDB, the programme focuses on capacity building, investment promotion and access to new markets. It will run until June next year.

"The project will not only enhance exporters' ability to compete successfully on the international market, but also enhance export earnings," Muhikira said.

Government plans to set up an export growth fund to scale up industrial production and product quality. The initiative could see the number of firms exporting over $1 million worth of goods per annum increase from current 65 firms, which accounted for 88 per cent of Rwanda's direct formal exports in 2013.

"More than 1,258 firms were exporting less than $100,000 in 2013 or only 3 per cent of the total exports. We want to change," says Robert Opirah, the director general for trade and investment at Ministry of Trade and Industry.

Experts take:

James Munyi, an export consultant and co-ordinator at the Kenya Export Promotion Council, says government should involve small-and-medium business (SMEs) for the strategy to succeed.

"You need to nurture SMEs with right skills to help them overcome the numerous bottlenecks they face along the value chain. This way, one can be sure of having a variety of products lined up for export," Munyi said.

He adds that there is need to promote non-traditional exports, especially those with high-value products, to achieve the desired results.

"Economic growth and exports are intertwined; you must develop your export capacities to develop.

"Creating avenues where SMEs can access credit is also vital... Apart from creating jobs for your citizens, it improves the capacity of small businesses to produce quality goods for the export market," Munyi noted.

Anne Rwiga, the Rwanda Manufacturers Association (RAM) secretary general, says there is need for exporters and policy-makers to work together.

"Creating a strong linkage between policy-makers and exporters is critical if we are to expand the exports base. We need to building strong relationships between the private sector and government institutions," says Rwiga, also the director of tobacco firm, Premier Tobacco.

New export targets by NAEB:

NAEB is projecting to fetch more revenues from tea exports, from $65 million (about Rwf44.2b) to $147 million (about Rwf100b) by 2017, while coffee exports are expected to more than double earnings from $73 million to $157 million during the same period.

Government also plans to enhance honey, handcrafts and horticulture production and exports as part of the new strategy.

Early August, the government signed a deal with nine exporters, in a move aimed at strengthening their capacity to produce more and better items for the export market.

Experts say more still needs to done to support industrialists, especially providing adequate and constant power supply, easing the tax regime and skilling the workforce to spur the export sector to greater heights.